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Hello,
I want to know, why the answer to Faoilean question, part b) say that shareholders have a CALL option on the business? I searched already in the forum for your explanation of this exam question: “Holding shares in a company is similar to holding a call option because if the debt in the company exceeds the asset value then the shareholders can walk away (due to limited liability) whereas if the assets exceed the debts then the shareholders will continue in the business in order to get the surplus”, which I understand. But is this not similar to PUT option? They can sell shares at market value if they do not want to hold shares in the company anymore. What am I missing?Hi,
I still don’t understand point b) ungearing and asset beta of current company, how do we come to 1.646?
I also have some difficulties with other areas of BSS Stories exam question.
Option 2, value off equity, (425 mio x 4 – 217,75 mio) x 4. I know that market value of this share is 4, but why do we need multiply 4 two times? Is the first 4 something else?What about asset beta adjusted, value of retail sector 5569 and 4705 in both options. How do we come to this numbers?
Hi,
with regard to this question and terminal value: why did in sample answer working 4, PV of cash flows in perpetuity calculated CF x g/wacc – g, and not only growth?
And than discounting, why did they use factor 4years?Hello
I am also studying this question and I was wondering, when we calculate value of shares (part a, i), we take 77% and 82%. Why is this? I see that it is connected with gearing 18 and 23%, but can you help me understand this?
If this kind of question would repeat on the exam, how do we know how much different values we have to calculate? If I would use current market price, realizable values and PE, but not CF, how much points can I expect?
Thank you
